Posted by: Josh Lehner | November 21, 2017

Thanksgiving, Traffic, and your Nephew

Three thoughts as Thanksgiving nears.

First, many of us will be stuck in traffic as we head to meet our family and friends. AAA of Oregon/Idaho estimates it will be the worst traffic since 2005. Most of this congestion is about the abnormally large number of cars trying to drive at peak holiday times, but we have seen overall increases in traffic in recent years.

It is hard to portion exact blame for the increases in total vehicle miles traveled (VMT) in Oregon. That said, we know truck traffic is up about the same as passenger vehicle traffic. We know a growing population usually results in more driving. However, if you separate population growth on one hand (number of people, or potential drivers), and driving behavior (number of actual drivers, what each driver does) on the other hand, you get a rough 40-60 split. That means changes in driving behavior account for the lion’s share of the VMT increases. It’s about more than population growth.

Some of the VMT gains are likely due to a stronger economy. We have more jobs, and higher incomes, so we’re able to afford to drive more. Similarly, Oregon has seen larger increases in vehicle registrations and driver licenses issued than population growth alone would suggest. That said, the big drop in gas prices that began in late 2014, and the increases in fuel economy/fuel efficiency are major factors at work too. As the price per gallon of gasoline dropped by more than a third, Oregonians have increased their total gallons of gas purchased by about 10%. Oregonians are buying more gas in order to drive more. A similar effect is seen in fuel efficiency: as the cost per mile driven falls, we drive a bit more. Although fuel efficiency is plateauing for new purchases in recent years, at least in part because Americans/Oregonians are purchasing more trucks and few cars. The overall efficiency of the fleet can continue to increase as older vehicles are taken off the road, however.

Some academic studies show that the price drop we have seen in recent years is more than enough to explain the increases in VMT. That implies that all of the increase in traffic is due to lower gas prices and not about population growth or other factors. However, other studies show that maybe 20% of the VMT increase can be explained by the price drops. I don’t want to get into the warring battle between studies, but it’s clear that prices matter and are a significant factor influencing traffic in recent years. It is also a distinct possibility that lower gas prices are the primary, even sole, driver of the traffic increases.

Second, as we sit around the table with our friends and family, inevitably the topic of what our children, or our nieces and nephews are doing will arise. Parents love to talk about their kids, and, at times, other people’s kids as well. Along these lines, there has been a lot of hand-wringing in recent years about the lack of summer jobs for teenagers. This includes the plummeting labor force participation rates for young Americans and young Oregonians alike. As such, it is true that kids these days are not working to the same degree as past generations. That does not mean, however, that they’re necessarily up to no good.

Youth crime is down by more than half, and there has not been a huge increase in the number of Idle Youth. The decline in LFPR has been nearly perfectly offset by increased enrollments in school. Over time educational attainment is rising, which is the silver lining to today’s lower participation rates. We have fewer potential workers today, but tomorrow’s workers will have better skills. Or so the story goes. And enrollments are falling today as the economy strengthens, but that is a topic for another day. This week: be nice to your nephew!

Now, this doesn’t mean there aren’t potential issues with lower participation rates. Chiefly, one misses out on work experience and learning the so-called soft skills like communication, taking directions, accepting feedback, being a team player, and the like that are needed to succeed in most workplaces.

And finally, third, Happy Thanksgiving everyone!

Posted by: Josh Lehner | November 16, 2017

Oregon’s Population Growth, 2017 Update

Apologies for the lack of recent posts, I have been in and out of the office a lot lately. However I am back up and running now ahead of our next forecast that will be released Nov 29.

Yesterday some of the most important economic numbers for Oregon were released. I’m not talking about jobs, or wages, or taxes paid. Rather, I’m referring to the Portland State Population Research Center’s preliminary 2017 population estimates for Oregon, and cities and counties. [Press release here, data here] These numbers matter considerably because they are the official state estimates used for distributing shared revenues, land use laws, and the like. However it should be noted that PSU tends to be more accurate than Census estimates in real time, for these intercensal years. Now, the 2017 numbers will be certified and made official next month but let’s dig into them a little bit with a high level look.

Our office’s baseline outlook has called for population growth to slow overall as the economy transitions down to a more sustainable, longer-run rate. In an earlier post we looked at surrendered driver licenses at Oregon DMVs which is a good leading indicator. That showed that population growth had likely topped out. Well, the latest population data shows that overall population growth statewide did not slow in 2017, but it does appear to be topping out in the near future. The second derivative has turned negative. Specifically, the new PSU numbers show that in 2017 Oregon population increased by 64,750 or 1.59% which was a bit stronger than in 2016 when the state added 62,505 new residents for a 1.56% increase. Net migration drives the vast majority of Oregon’s population gains, particularly as the natural increase continues to slow. That is, births still outnumber deaths in Oregon, but that gap is narrowing.

Our office still believes slower population growth is the right near-term outlook, however it did not come to pass in 2017. Along with these new numbers, our office will be updating our statewide population forecast in the near future to take them into account. I will post Kanhaiya’s new outlook when he finalizes it.

Looking across the state, every single region and every single county added population in 2017. Some faster than others of course, but all parts of Oregon are growing which is good news for the regional economic outlook. Of course the type of population growth matters, and we will get more detailed population data in the coming months. For now, PSU has released the total numbers and they show positive trends across Oregon.

Finally, for those interested in the county level figures, the trellis chart below compares local population growth trends with the statewide average. Again, every single county added residents in 2017. Every county saw population growth in 2015 as well. Only one county (Grant) lost population in 2014 and 2016 while all others saw gains. So we have now seen, essentially, 4 years where every part of Oregon is growing again.

Given the robust gains during the housing boom/bubble in Central Oregon, we have to put them on a separate chart in order to not mess up the axis on the trellis above. While similar in pattern, Central Oregon has returned to super-charged growth rates.

Stay tuned for more on regional and local population trends in the coming months as our office works to update our outlook and PSU releases additional information early next year. Additionally, I will have a bit more on decomposing the gains in the Portland (and Seattle) areas, looking at City vs Suburbs and the like.

When trying to look at a regional economy’s longer-run potential, one key driver is population growth, and the underlying demographics. Specifically, if an area is able to see a growing working-age population, the region is obviously better poised for growth. Our office calls the root-setting years, 25-34 years of age, the gold standard for economic development. The reason is migration rates plunge considerably as folks age into their late 30s and 40s and beyond. So once a region is able to attract 20- and 30-somethings, the region generally has them for their peak working years. Historically, this has been one of Oregon’s comparative advantages — the ability to attract and retain young, working-age households. However, working-age population gains can also be due to higher local birth rates and not just due to migration patterns (e.g. Salem’s bright future.)

All of this, combined with the fact I’ve given a handful of presentations in Lane County this year, leads us to this edition of the Graph of the Week. While population growth is overall advantageous — even if it does come with some growing pains — the type of growth matters. The chart below shows expected population growth in Oregon and in Lane County (Eugene MSA) based on the most recent population forecasts from our office and from Portland State’s Population Research Center. The point here isn’t to argue about which forecast is best, but rather to highlight the implications of the differences between them.

First, notice over on the left. Both our office’s 2013 forecast and PSU’s 2015 forecast for Lane County are pretty much identical. Our office forecasts annual population growth to be 0.85% between 2015 and 2030, while PSU forecasts it to be 0.90%. No real difference. However the composition of that growth is considerably different. Our office’s outlook expects growth in the all-important 25-44 year old age group to be twice as fast as what PSU forecasts. Conversely, PSU expects growth in the 65+ age group to be nearly twice as fast as our office’s forecast.

In terms of the longer-run outlook, or in terms of the region’s potential economic growth, which forecast is more accurate is Lane County’s million dollar question. If reality is closer to the blue bars, Lane County will see stronger economic growth moving forward. From an industrial structure perspective, the region looks solid. There is not some local imbalance that is likely to hold back growth relative to the rest of the state. However, if reality is closer to the gray bars, Lane County’s overall economic growth would be expected to be slower. The limiting factor would not be the industrial structure, but the labor force.

These questions, and the implications that arise are important to each regional economy. I am using Lane County as an example because I have spent more time lately thinking about the Eugene MSA and also because of the relative differences in the two outlooks. Again, I’m not trying to argue which forecast is best, but rather to highlight the differences and how to think about the outlook. Note that Portland State’s Population Research Center is currently working on updating the Region 1 forecasts (including Lane). In the past month they have held public meetings to discuss the data and outlook, and will release the new forecasts by mid-2018.

Finally, a few summary notes on the Eugene MSA. The Great Recession was more severe in Lane County than in much of the state. The region’s lost manufacturing jobs are not cyclical, but structural. In some other regions, manufacturing losses were largely cyclical. Not in Lane County. It takes a long time to reorient an economy after suffering such large losses. As such, the Eugene MSA’s recovery took awhile to get going, however growth in recent years has been pretty good. The region’s jobs gap — the difference between actual employment trends and population growth — is nearly gone. Overall, the Eugene region’s economic trends closely track the typical urban areas across the country in recent decades. Furthermore, the region’s trends closely track those seen in other parts of the country that have similar industrial structures. Looking forward, Lane County’s industrial structure is pretty well balanced for growth, when compared with the state overall. There is not some industrial structure imbalance that looks to weigh on growth moving forward.

UPDATE: In the comments, Brian Rooney, the Employment Department’s regional economist for Lane County, adds the following:

It’s interesting that PSU has such strong growth in the 65+ age category. Lane does get some in-migration from retirees in the coastal area around Florence, but that’s a relatively small portion of the overall county population. The Eugene area also has available health care with the Riverbend hospital and a VA clinic that may be attractive to retirees. On the other hand, we also get some young professional, lifestyle in-migration and there are U of O graduates who want to stay in the area. It will be interesting to see if PSU makes an adjustment to the forecast when it is published in mid-2018.

Posted by: Josh Lehner | October 27, 2017

Oregon Vice

Yesterday, I had the privilege of presenting on Oregon’s vice revenues as part of Tim Duy’s Oregon Economic Forum. Our office’s duties include forecasting these revenues as part of the General and Lottery Fund forecasts. However, hardly anybody ever asks us about them specifically, other than in the context of the overall forecast and budget discussion. I think this is for at least three reasons.

First is their relative size. While these vice revenues total $2.7 billion in the current biennium (the state keeps about $2.4 billion, the remainder is shared or transferred to cities and counties), this represents about 3% of the state’s All Funds budget. In the context of the General and Lottery Funds, these revenues account for 9% of the total. So they’re clearly important in the big picture, but represent a relatively small share of the overall budget.

Second, most of these vice revenues do not have much of an economic impact in Oregon. Some, of course, do have costs associated with them. That said, we don’t specialize in tobacco manufacturing, nor are we Las Vegas. These revenues are generated based on daily behaviors of Oregonians, but they’re largest taxes assessed on products brought into the state.

Third, the vast majority of us abstain entirely or consume our vices in moderation. They represent no portion or a small portion of our time and our budgets. Enjoyable, but largely immaterial to our well-being. And we get a little uncomfortable thinking about those who do not consume in moderation, and thinking about the societal or public health impacts of excess.

With that in mind, below is a copy of the presentation slides. For those interested in more, you can click on the link below to download a copy of the slides with notes that summarize the research and talking points behind the slides.

Oregon Vice Revenue Slide Notes

Note: Due to timing, I stopped the actual presentation on slide 12 and did not discuss the labor force participation issues or the Deaths of Despair. For this reason I am not including the associated notes on that portion. Additionally, our office does have a forthcoming report in the works on the Deaths of Despair, so stay tuned for that in a few weeks.

Posted by: Josh Lehner | October 19, 2017

Employment Reports, Preliminary Data, and Forecaster Bias

A few thoughts that help interpret the recent Oregon employment reports showing job losses. Keep in mind Oregon went through something similar in 2015 and, like then, our office is not worried today for one very important reason. (Hint: it’s wages)

First, Oregon’s economy has clearly slowed over the past year or two. No longer are we seeing full-throttle rates of growth. An economy digging out of a recession behaves differently than one approaching full employment. Oregon is transitioning down from peak growth rates to something more sustainable. At least until the next recession when we start the cycle anew.

Second, economic data gets revised. All the time. The very first release, when the data is preliminary, gets the most attention. However the conversation is just getting started even if no one sticks around to finish it.

Third, unfortunately, the economics profession has a clear culture of chasing the most recent data point. Economists know data is preliminary and will be revised. Economists know that one data point does not make a trend. And yet, if you track forecasters via the Wall Street Journal, or the Philly Fed, or the like, it shows that the tail wags the dog more often than we care to admit.

These three points are intersecting right now in Oregon. Last quarter, as our office prepared the forecast, we were seeing a string of 6,000 jobs per month gains from April through July. Those weren’t sustainable and marked a return to the peak rates. That didn’t make a whole lot of theoretical sense, nor did it match the withholdings coming out of Oregonian paychecks. But that’s what the employer survey data showed and we discussed this with our advisors.

As we wrote in the forecast, we basically treated the preliminary data as upside risk. We tried to frame the discussion around what conditions we’d need to see to support these strong gains, including faster population growth and higher labor force participation rates. We did not build the return to full-throttle growth into our forecast. At the end of the day our forecast is a budgetary planning tool. We are not going to let preliminary data wag the dog, particularly not when actual tax collections are not following suit.

It turns out this was the correct forecast. As seen in the first chart below, for whatever reason, the Current Employment Statistics (CES, aka the employer survey) appears to have gotten off track a bit and is now on a course correction. The Quarterly Census of Employment and Wage (QCEW) is a near universal record of jobs and wages, but lack timeliness. Just last week we got data for April, May, and June. Given the QCEW’s accuracy, every year the CES is benchmarked, or revised to more closely resemble its trends. I’m not here to fault BLS too much. Survey work is hard. But I am here to say we should always take preliminary data with a grain of salt.

While the employment data appears to be getting back on track, the primary reason our office is not concerned about the preliminary job losses is the fact that wages continue to grow in Oregon. Withholdings out of Oregonian paychecks are considerably noisy, but two clear trends stand out. First, growth has slowed in the past year or two. Second, growth remains positive. There has yet to be any real concerning numbers that indicate economic growth is teetering on the brink just yet.

Bottom Line: The economic outlook remains intact. Preliminary data gets revised. The two recent employment reports showing losses, to a large degree, are offsetting huge gains in the previous months. So to those looking to pin the losses on the wildfires or the minimum wage, well, these are not the data you are looking for. Our office is currently working on the next forecast, which will be released Wednesday, November 29th.

Posted by: Josh Lehner | October 10, 2017

Oregon’s Timber History, An Update

Over the past year a cross-agency team has identified and geocoded current and former mill sites in Oregon. The team is made of brownfield program managers from DEQ and OHA, folks from DLCD, Business Oregon, and Portland State researchers. Their ultimate goal is to find ways to repurpose some of these sites, however you first have to identify them. I was brought in to provide a summary and outlook of the timber industry, largely based on our office’s 2012 report. I argue that report is one of the most informative pieces our office has done. It also continues to be quite popular as web searches for things like “1970s Oregon timber history” are a daily occurrence. For these reasons it was time to update our Oregon timber industry work. What follows is an industry recap and a new set of slides.

In the 1970s when annual Oregon timber harvests totaled more than 8 billion board feet, the industry was a huge economic force. The sector directly employed 80,000 or so workers at wages some 30% above the statewide average. As such, the timber industry accounted for 1 out of every 10 private sector jobs across the state, 12% of state GDP, and 13% of all private sector wages. While there were timber-related jobs in every part of the state, these impact figures were considerably larger in many rural communities, particularly in eastern and southern parts of the state.

Beginning with the severe early 1980s recession the industry has undergone massive changes. At that time the industry restructured as interest rates soared and the housing market collapsed. Many of the existing mills had come to the end of their life cycle and needed to be retooled. There was also increased market competition with lumber coming from southern U.S. states and British Columbia. The result by the end of the 1980s was a more efficient, yet smaller in some ways industry. Harvest levels and output had returned but employment never recovered: industry jobs in 1989 were 17% below 1979 figures. Then the federal restrictions took hold, sending the industry on a downward spiral that was only briefly, temporarily interrupted during the go-go days of the housing bubble.

Today, annual Oregon timber harvests are a bit less than 4 billion board feet. Some of the decline is due to the age and stock of the forests; you can only cut old growth once. Private harvests are down 20% since the 1970s, however, by far the biggest driver is that logging on federal lands is down nearly 90%. Direct industry employment is now about 30,000, or a decline of 60 percent. Due to automation, increased competition, large supply of former industry workers and the like, wages have stagnated. Today the industry average wage is equal to the statewide average. Timber-related jobs are still middle-wage jobs, however they no longer pay a premium like they used to. These same trends impact manufacturing overall.

The industry outlook at this point is pretty steady. Demand for raw logs from China is ebbing some, however the ongoing U.S. housing recovery is encouraging. Our office’s expectations, based on input from our advisors, is for both harvest levels and employment to hold steady around levels seen today. We likely need a big event to drastically change the outlook. To the upside such an event would be a change in federal policy, specifically larger timber harvests, not the Canadian lumber tariff. To the downside we’re looking at a recession, particularly one where housing dries up. Given the fundamental underbuilding of housing in recent years, this not entirely a foregone conclusion next recession. It depends some upon the nature and severity of the next business cycle. Furthermore, as noted the other day when discussing natural disasters, the loss of forested lands can impact future economic growth as you cannot log a forest that no longer exists. Of course it matters where such land is located and who owns its.

Finally, a few additional notes.

  • First, the economic shock the Timber Belt has taken is not unlike what the Rust Belt, Corn Belt and old textile mill towns in the south experienced. However, people moved away from those places when the jobs left. In the Timber Belt, people keep moving in. Furthermore, even as the 1990s were largely characterized by a strong national economy, poverty rates throughout much of the Timber Belt actually rose.
  • Second, our office talks about the Changing of the Guard from a statewide preservative. The rise of high-tech has pretty much directly offset the decline of the timber industry. Of course this isn’t entirely a fair comparison, and the geographic location of these jobs are considerably different. One advisor notes that it doesn’t have to be an either/or situation. Why can’t we have both sectors strong?
  • Third, Gail Krumenauer at the Oregon Employment Department has dug through the data to better account for industry employment. Gail finds some 55,000 industry jobs statewide in 2015. This is very likely a better estimate to use. However that work uses a broader industry definition than we use, but more importantly Gail does a really good job of identifying independent contracts and the like, along with public sector employees tied to the forest sector. That does make reconfiguring the data backwards more challenging than our office’s work presented here. That said, there is no question that whatever data series and estimates one uses, the long-term trends remain the same. Do read Gail’s work for a more detailed account of the current landscape of employment.
Posted by: Josh Lehner | October 6, 2017

Oregon’s Shifting Retail Landscape (Graph of the Week)

There’s no question that online sales have been, and will continue to change the retail landscape. However, it can be hard to show exactly how this is influencing and impacting standard economic data. Sure, Census reports e-commerce sales as a share of all retail sales on a quarterly basis, but that’s simply a slowly increasing figure over time that has yet to breach 10%. Here in Oregon we have even greater data limitations, so consider this a first pass at trying to show the changes.

The upshot is there has been a clear impact on employment within the retail subsectors that seem to face the most online competition. Given data availability for Oregon, these subsectors include clothing, shoe, and jewelry stores, sporting goods, hobby, book, and music stores, and department and other general merchandise stores. For now we are calling these Brick and Mortar retailers as shorthand for writing out all those different types of stores. While jobs in Brick and Mortar retailers have stopped growing in the past 18 months, even down a couple hundred, they have been more than offset by other gains related to retail. For example, employment continues to grow in e-commerce related sectors like nonstore retailers (online, mail order, etc), couriers and messengers (delivery trucks), and warehousing and storage jobs. These e-commerce jobs are up around 2,300 in the past 18 months. This transition is resulting in more jobs overall, even as the type of jobs and the nature of the work do shift.

Furthermore, it is important to note that retail jobs overall continue to increase due to gains in all other retail subsectors outside the Brick and Mortar ones. Employment at car dealers is growing, following trends in car sales. Jobs are increasing at home improvement stores, grocery stores, and now OLCC licensed recreational marijuana retailers. The calls of a retail apocalypse are overblown. That said, there have been numerous closures among large, national retailers. Some of which are painful not just for the workers, but also the individual developments and downtowns that are losing their anchor tenants. Repurposing these former retail spaces is a high priority.

In terms of the outlook, our office forecasts retail jobs to increase in Oregon, even with the shift toward online and some minimum wage impact. The biggest reason is that Oregon continues to see a growing population, and therefore increasing consumer demand. The old adage is retail follows the rooftops. Now, we do not expect exceptionally strong gains, somewhere around 1% per year for the next few years given the impact of these larger shifts. We also know there have been additional announcements of large distributions centers in the Willamette Valley. As such the ongoing retail shift will continue.

Again this is our first effort at trying to quantify and show some of these changes. Online competition is far reaching and has influenced many different trends (e.g. travel agents), though they are hard to isolate in the data. We welcome your input and feedback!

For more please see this article by Oregon Employment Department’s Ainoura Oussenbec from this summer talking about trends in the retail industry and OED’s projections.

Posted by: Josh Lehner | September 28, 2017

Large Metro Transformations (Graph of the Week)

Recessions have a way of reorienting or even restructuring an economy. Some industries fall back, others step forward. These changes propel entire regional economies ahead of others depending upon the nature of the business cycle. As we document in our new research report, Portland has been Top 5 for high-wage job growth, rising levels of educational attainment, and household income gains. However, Portland is not alone when it comes to seeing big gains, as shown below in this edition of the Graph of the Week.

Many of the other metros seeing similar growth to Portland are no surprise. These include Austin, the Bay Area, Denver, and Seattle, among others. However, there are a few surprises. In terms of relative rankings, the only other metros besides Portland to see such sizable jumps were Grand Rapids, MI and Pittsburgh, PA. While similar in percentage changes to Portland, these other two metros were starting from a different base. I would also argue that the changes in Grand Rapids and Pittsburgh have been even more transformational than in Portland. Portland went from the top third to the top fifth of metros for these measures. Grand Rapids went from 61st to 43rd for income, and 73rd to 51st for educational attainment. Pittsburgh, already a highly-educated metro, went from 38th to 22nd for educational attainment, but from 81st to 58th for household income. Those are massive gains, but different in nature than those seen here in Oregon.

Posted by: Josh Lehner | September 28, 2017

REPORT: Portland in Transition

The new Census data shows that the recovery and expansion has now reached all corners of the Oregon economy. Not all industries, segments of the population, or regions are in the same place given each regional business cycle was a bit different. However, we are now seeing gains across the board. The trajectory, at a minimum, is pointing in the right direction.

One place where the improvements really stand out is in the Portland metro area. It makes sense given job growth returned first to the large metros across the country, so they have been in expansion the longest. That said, when stepping back and looking at the business cycle as a whole, and comparing the 100 largest metro areas in the country, the gains in the Portland region are considerable. Portland’s growth has been transformational, and not just when it comes to the apartment boom in the urban core. To date, it is clear that Portland is transitioning as it pulls away from its former economic peers.

Below is a short, high level summary of these findings along with a more complete slide deck for those interested.



Posted by: Josh Lehner | September 21, 2017

Oregon Metro GDP, 2016

Hot on the heels of metro level household income data, we now get the annual metro GDP figures as well. In stepping back and looking at the bigger picture, the metro GDP growth looks like one would expect. There is a good reason for that. More in a minute.

Oregon is outperforming the typical state for jobs, wages, and GDP. As such, all of our metros are above average in the most recent data, which makes sense. The specifics can vary a bit, particularly as Albany and Bend register Top 10 in the nation growth. Albany’s growth is led by manufacturing, both durable and nondurable goods. Bend’s by health, professional and business services, and finance. That last one is interesting as Oregon is not a financial hub. Certainly something to look into in the future if it continues.

This second chart compares metro GDP over the entire business cycle. Where are you today relative to before the Great Recession? Here, again the patterns looks like you probably expect. All metros are in the top half or better. Oregon is more volatile. We fall farther in recession so have further to regain in expansion, etc. However one metro sticks out. One is not like the others.

Let’s take a little closer look at the Corvallis MSA (Benton County.) In looking at the industry level GDP, the issue is all about manufacturing value-added. Hmm. This is a really big rise and subsequent fall. The timing is also of interest given the declines didn’t happen until a couple of years after the recession.

What I suspect is going on here is more about how metro GDP is calculated than what is actually happening in Corvallis. What BEA does is calculate state GDP by industry. BEA then shares that down to the metro areas based on earnings by industry. For example, and these are made-up, simplified numbers, if Corvallis has 10% of Oregon’s manufacturing earnings, then basically Corvallis gets 10% of Oregon’s manufacturing value-added. This is fine so far as it goes. However when a particular industry in one region is doing exceptionally well, then this sharing down method yields skewed results. I think walking through a few charts is best to explain this and show the limitations of the data/methodology.

With Oregon GDP there is one, and only one industry that can move the needle like this: computer and electronic products manufacturing. This is also an industry that has a very specific geographic footprint for the most part: Portland, where the vast majority is, and Corvallis. At the state level you can see that the rise and fall of overall manufacturing GDP is all about computer and electronic products. While we don’t have access to the firm level estimates, we know a lot of this growth is due to new semiconductor technology. Each generation of chips, and the fabs that make them are more productive and valuable than the previous generation. It also requires massive investments every handful of years. That research and development occurs in the Portland region. The computer and electronic products in Corvallis are more printer technology related, which has not seen the same growth and investments like semiconductors in recent decades.

Note: Detailed 2016 industry data is not yet available, that is why the total line extends to 2016 and the detail does not.

Now, we know that manufacturing employment in the Corvallis MSA is down and down considerably in the past decade, while Portland’s manufacturing employment has done reasonably well, compared with most regions of the country. However, when you take the state data and share it down to the regions some of that growth is distributed too. In this case, it means Corvallis has received a share of the Portland area investments and expansions because they are classified within the same industry.

And the way you make all of this square, is seeing huge productivity gains (value-added per worker). Are Corvallis manufacturing workers twice as productive as the typical manufacturing worker statewide? Possibly, but unlikely. Some of this, no doubt, is due to the local industrial mix. If a local economy has a mix of higher productivity industries and fewer lower productivity industries then the total will be high. That’s at play here, but so too is the metro GDP methodology.

So, long story short, local level GDP data should be taken with a grain of salt. It is indicative of broad trends and what is happening in the local economy, however imperfect it may be. This is in no way meant to disparange BEA, they are doing the best they can with limited data. They do a great job looking at industry level value-added at the state level. This is fantastic data to have and helpful when looking across a host of economic metrics.

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